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Meeting With FDIC’s Bair the Latest Step in Overdraft Efforts

In a private meeting last Thursday with FDIC Chairman Sheila Bair, I expressed in clear, uncompromised terms ICBA’s strong opposition to the agency’s final guidance on overdraft protection programs and hand delivered to the chairman a set of specific ICBA recommendations that would mitigate the negative effects of the guidance on well-run, well-intentioned overdraft programs. I made clear to the chairman that, unchanged, the guidance will have a negative impact on the nation’s community banks and, perhaps more importantly, the customers they serve.

The agency’s final guidance includes burdensome and onerous provisions requiring financial institutions to monitor for excessive customer use of the programs, contact customers who have incurred more than six overdrafts in a rolling 12-month period and institute daily fee limits. And while I was given assurances that the guidance does not target ad hoc overdraft programs, it fails to explicitly exempt ad hoc programs as requested by ICBA—at least to date.

ICBA has repeatedly voiced opposition to the FDIC guidance in communications with the agency. In a letter to Chairman Bair two weeks ago following a meeting of ICBA and FDIC staff, I urged the agency to delay the effective compliance date for the guidance to 2013 at the earliest and to use the time to assess current overdraft payment practices in the industry caused by recent regulatory changes. I also called on the agency to ensure that its examiners are not attempting to enforce the guidance prematurely, which community bankers have told us is happening. I also voiced serious concerns and opposition to the guidance in a November letter to Chairman Bair, and ICBA registered its opposition, concerns and recommendations in a September comment letter.

After the FDIC released the guidance—on the day before Thanksgiving—I wrote on my blog that it represents the nanny state gone wild. Community banks began offering overdraft programs at the urging of their customers. By introducing new and excessive compliance burdens and requiring community banks to constantly harass customers over the status of their bank accounts, the FDIC threatens to shutter overdraft programs demanded by consumers and destroy the delicate relationship balance between the community banker and the customer. As a nearly lifelong community banker myself, I know firsthand how delicate the relationship between a banker and a customer can be.

The good news is that the chairman was attentive to our concerns and expressed a willingness to work with ICBA going forward to improve and clarify the guidance and to make clearer that ad hoc programs and well-administered programs are not the target of the guidance. The chairman also promised to reach out to bankers both personally and through her staff to answer the questions and concerns of bankers nationwide. Of course the proof is in the pudding, as they say. ICBA will remain vigilant to community banker’s concerns on this very important issue. We will continue to meet with key FDIC staff as the effective date of the guidance approaches in mid-summer. As always, ICBA will stay at the policy table to make sure the clear, uncompromised voice of community bankers is heard on this and every other critical issue of our day.

As ICBA continues working with the FDIC on this issue, we will continue doing everything we can to protect community banks and their customers. You can assist us by providing ICBA real world examples of how well-meaning customers can be hurt by overzealous enforcement of the overdraft guidance. Together we can make a difference.

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